Principles of Marketing

Chapter 2 Company and Marketing Strategy

Week 2
 Company and Marketing Strategy
Learning Objectives
Objective 1: Explain company-wide strategic planning and its four steps.
Objective 2: Discuss how to design business portfolios and develop
growth strategies.
Objective 3: Explain marketing’s role in strategic planning and how
marketing works with its partners to create and deliver customer value.
Objective 4: Describe the elements of a customer value-driven
marketing strategy and mix, and the forces that influence it.
Objective 5: List the marketing management functions, including the
elements of a marketing plan, and discuss the importance of measuring
and managing marketing return on investment.
 Strategic Planning
• Plan: Means making decisions today to secure your tomorrow.
• Strategic Planning: Managing the strategic fit between one’s
goals and capabilities and its changing marketing
opportunities.
• Adapting the resources of the firm to the opportunities and
threats of an ever-changing retail environment.
• Focused not on current business but future opportunities
 Company and Marketing Strategy

Learning Objective 1

• Explain company-wide strategic planning and its four steps.

Company-Wide Strategic Planning: Defining Marketing’s Role

 Objective 1: Company-Wide Strategic Planning
Strategic Planning

Strategic planning is the process of developing and

maintaining a strategic fit between the organization’s
goals and capabilities, and its changing marketing
opportunities.
Objective 1: Company-Wide Strategic Planning

Steps in Strategic Planning

 Objective 1: Company-Wide Strategic Planning
Strategic Planning Process
Strategic Planning company strategy for long-run survival and growth.
This process involves:
• Defining a Mission: Statement of an organization’s purpose; should
be market oriented.
• Setting Company Objectives: Supporting goals and objectives to
guide the entire company.
• Designing a Business Portfolio: Collection of businesses and
products that make up the company.
• Planning Functional Strategies: Detailed planning for each
department designed to accomplish strategic objectives.
 Objective 1: Company-Wide Strategic Planning
Steps in Strategic Planning
Corporate level: i.e., headquarters
• Define mission statement
• Set objectives and goals
• Design business portfolio
• Strategic Business Unit (SBU) level e.g., a product line, division, single
product, or brand
• Plan functional strategies for delivering value
• Includes marketing planning
 Objective 1: Company-Wide Strategic
Planning
Mission Statement
A mission statement is a statement of the organization’s purpose–what it wants to
accomplish in the larger environment.
• It’s a basic description of the fundamental nature, rationale, and direction of the
firm.
• Basically answers “what business are we in?”
• Less than 60% have a written mission statement
• Should be crafted at “the most meaningful level of generalization possible”
• Should be market oriented, not product oriented
• Risk
• Marketing Myopia
• Focused on customer experience, not sales and profits.
Mission
Mission Statements
2-3
Statements
2-3

Market
Market
Oriented
Oriented

Motivating
Motivating Realistic
Realistic
Characteristics
Characteristics
of
of Good
Good Mission
Mission
Statements
Statements
Distinctive
Distinctive Specific
Specific
Competencies
Competencies
Fit
Fit Market
Market
Environment
Environment

 Copyri ght 1998 P rentice Hal l

 Objective 1: Company-Wide Strategic Planning

Defining a Market-Oriented Mission

• The mission statement is the

organization’s purpose; what
it wants to accomplish in the
larger environment.
 Objective 1: Company-Wide Strategic
Planning
Goals
Established as a hierarchy andthatObjectives
of objectives “feed” the lower levels:
• Business objectives
• More about “what” (e.g., increase profits)
• Marketing objectives
• More about “how” (e.g., increase market share domestically)
Each manager should have objectives and be responsible for reaching them. Why?
1. Provide direction and guidance to the firm in the formulation of its strategies.
• An [intermediate] “destination” for the firm
2. Establish a standard against which to measure and evaluate future firm
performance.
• They minimize the ability for ex post justification
Objective 1: Company-Wide Strategic Planning

Setting Company Objectives and Goals

Business objectives Marketing

objectives
• Build profitable • Increase market
customer share
relationships • Create local
• Invest in research partnerships
• Improve profits • Increase
promotion
 Objective 1: Company-Wide Strategic Planning
Setting Company Objectives and Goals
Heinz’s overall objective is to build
profitable customer relationships by
developing foods “superior in quality,
taste, nutrition, and convenience” that
embrace
its nutrition and wellness mission.
 Company and Marketing Strategy

Learning Objective 2

Discuss how to design business portfolios and develop

growth strategies.

Designing the Business Portfolio

 Objective 2 Discuss how to design business portfolios and
develop growth strategies.
Designing the Business Portfolio
The business portfolio is the collection of businesses and products that
make up the company.
Portfolio analysis is a major activity in strategic planning whereby
management evaluates the products and businesses that make up the
company.
 Objective 2 Discuss how to design business portfolios and develop growth strategies.

Designing the Business Portfolio

• The collection of businesses and products that make up the company.

Portfolio planning involves two steps:
• Analyze current portfolio & decide which should receive more, less, or
no investment
• Shape future portfolio through development and downsizing
 Objective 2 Discuss how to design business portfolios and develop growth
strategies.
Designing the Business Portfolio
• The best portfolio is the one that best fits the company’s strengths and
weaknesses to the opportunities in the environment.
• The company must:
• analyze its current business portfolio or Strategic Business Units
(SBU’s)
• decide which SBU’s should receive more, less, or no investment
• develop growth strategies for adding new products or businesses to
the portfolio
 Objective 2 Discuss how to design business portfolios and develop growth
strategies.
Strategic Business Unit (SBU)
A unit of the company that has a separate mission and objectives and
that can be planned independently from other company businesses.
Can be:
• A division,
• A product line within a division,
• A single product or even brand.
 Objective 2 Discuss how to design business portfolios
and develop growth strategies.
Designing the Business Portfolio

Strategic business units can be a

• Company division
• Product line within a division
• Single product or brand
Objective 2 Discuss how to design business portfolios and
develop growth strategies.
Designing the Business Portfolio
Analyzing the Current Business Portfolio

Identify strategic business units (SBUs)

Assess the attractiveness of its various

SBUs

Decide how much support each SBU

deserves
 Objective 2 Discuss how to design business portfolios
and develop growth strategies.
Designing the Business Portfolio
Analyzing the Current Business Portfolio
Growth-share matrix is a portfolio-planning method that
evaluates a company’s SBUs in terms of market growth rate
and relative market share.
 Objective 2 Discuss how to design business portfolios and
develop growth strategies.
Analyzing the Current Business Portfolio

The Boston Consulting

Group Approach
 Objective 22 Discuss
Objective Discuss how
how to
to design
design business
business portfolios
portfolios and
and
develop
develop growth
growth strategies.
strategies.
Analyzing
Analyzing Current
Current SBU’s:Boston
SBU’s:Boston Consulting
Consulting Group
GroupApproach
Approach
Relative Market Share
High Low
Stars Question
QuestionMarks
Market Growth Rate

Marks
High

• High growth & share ••High

Highgrowth,
growth,low
lowshare
share
• Profit potential ••Build
Build into Stars/ phaseout
into Stars/ phase out
• May need heavy ••Requires cash to hold
Requires cash to hold
investment to grow market
marketshare
share
Cash Dogs
CashCows
Cows Dogs

••Low ••Low
Lowgrowth
growth&&share
Lowgrowth,
growth,high
highshare
share share
Low

••Established, successful ••Low

Lowprofit
profitpotential
potential
Established, successful
SBU’s
SBU’s
••Produces
Producescash
cash
Objective 2 Discuss how to design business portfolios and develop growth
strategies.
Strategies from the BCG Matrix
Stars: High-share / high-growth Strategy: Build into cash cow via
investment.
Cash cows: High-share / low-growth Strategies: Maintain or harvest cash
to support STARS.
Question marks: Low-share / high-growth Strategies: Build into STAR via
investment OR reallocate funding and let slip into DOG status.
Dogs: Low-share / low-growth Strategies: Maintain or divest
investments.
Objective 2 Discuss how to design business portfolios and develop growth
strategies.
Problems with Matrix Approaches
Several problems exist:
• Can be difficult, time consuming, and costly
• Difficult to define SBU’s market share & growth rate.
• Focus on current businesses, not future planning.
Objective 2 Discuss how to design business portfolios and develop growth
strategies.
Portfolio Analysis Steps:
• Identify key SBUs that make up company
• Assess each SBU’s attractiveness
• Decide how much support is deserved
Most analyses are based on 2 factors (BCG):
• Attractiveness of market (i.e., growth rate)
• Strength within each market (i.e., share)
 Objective 2 Discuss how to design business portfolios and develop growth
strategies.
Designing the Business Portfolio
Problems with Matrix Approaches
• Difficulty in defining SBUs and measuring market share and growth
• Time consuming
• Expensive
• Focus on current businesses, not future planning
 Objective 2 Discuss how to design business portfolios
and develop growth strategies.
Strategy Designing the Business Portfolio
Developing Strategies for Growth and Downsizing
Product/market expansion grid looks at new products, existing
products, new markets, and existing markets for company
growth opportunities.
 Objective 2 Discuss how to design business portfolios and develop growth
strategies.
Product/ Market Expansion Grid
An alternative to the Product Matrix approach:
Identify growth opportunities based more on “needs”
• Market Penetration: increase sales to present customers with current
products. How? Cut prices, increase advertising, get products into more
stores.
• Market Development: develop new markets with current products.
How? Identify new demographic or geographic markets.
• Product Development: offering modified or new products to current
customers. How? New styles, flavors, colors, or modified products.
• Diversification: new products for new markets. How? Start up or buy
new businesses.
Objective 2 Discuss how to design business portfolios and develop
growth strategies.
Designing the Business Portfolio
Developing Strategies for Growth and Downsizing
Existing New
products products

Existing
markets

New
markets
 Objective 2 Discuss how to design business portfolios and
develop growth strategies.
Designing the Business Portfolio
Developing Strategies for Growth and Downsizing

Downsizing is when a company must prune, harvest, or divest

businesses that are unprofitable or that no longer fit the
strategy.
 Objective 2 Discuss how to design business portfolios and develop growth
strategies.

Learning Objective 2

Designing the Business Portfolio

• Analyzing the Current Business Portfolio
- Growth-share matrix
• Strategies for Growth and Downsizing
- Product/market expansion grid
 Company and Marketing Strategy

Learning Objective 3

• Explain marketing’s role in strategic planning and how marketing works

with its partners to create and deliver customer value.

Planning Marketing: Partnering to Build Customer Relationships

 Planning Marketing: Partnering to Build Customer
Relationships
Partnering with Other Company Departments

Value chain is a series of departments that carry out value-creating

activities to design, produce, market, deliver, and support a firm’s
products.
 Planning Marketing: Partnering to Build Customer
Relationships

Partnering with Others in the Marketing System

Value delivery network is made up of the company, suppliers,

distributors, and ultimately customers who partner with each other to
improve performance of the entire system.
 Company and Marketing Strategy

Learning Objective 3
• Explain marketing’s role in strategic planning and how marketing
works with its partners to create and deliver customer value.

Planning Marketing: Partnering to Build Customer Relationships

- Partnering with Other Company Departments
- Partnering with Others in the Marketing System
 Company and Marketing Strategy

Learning Objective 4

• Describe the elements of a customer value-driven marketing

strategy and mix, and the forces that influence it

Marketing Strategy and the Marketing Mix

Marketing Strategy and the Marketing Mix
 Marketing Strategy and the Marketing Mix
Customer Value-Driven Marketing Strategy

Marketing strategy is the marketing logic by which thecompany hopes

to create customer value and achieve profitable customer
relationships.
 Marketing Strategy Decisions & the Marketing Mix

STDP- Customer Value-Driven Marketing Strategy

• Segmentation: The process of dividing a market into distinct groups of
buyers who have different needs, characteristics, or behaviors and who
might require separate products or marketing programs.
• Targeting: Involves evaluating each market segment’s attractiveness
and selecting one or more segments to enter.
• Differentiation: Creating superior customer value by actually meeting
the needs better than the competition /“differentiating”. Assists in later
positioning
• Positioning: Arranging (perceptually) a product to occupy a clear,
distinctive, and desirable place relative to competing products
 Marketing Strategy and the Marketing Mix

Developing an Integrated Marketing Mix

Marketing mix is the set of controllable, tactical marketing tools—

product, price, place, and promotion—that the firm blends to produce
the response it wants in the target market.
Marketing Mix- The Four P’s Price
Product
“Goods-and-service” Amount of money
combination that a that consumers
company offers a have to pay to obtain
target market the product

Target
Customers

Intended
Positioning

Activities that Company activities

persuade target that make the
customers to buy product available
the product
Promotion Place
 Marketing Strategy and the Marketing Mix
Developing an Integrated Marketing Mix
• The marketing mix:
• Set of controllable, tactical
marketing tools

• Blended to produce the

desired response in the
target market
 The 4 Ps and the 4 Cs of the Marketing
Mix
4 Ps – Seller’s View
• Product
• Price
• Place
• Promotion
4 Cs – Buyer’s View
• Customer Solution
• Customer Cost
• Convenience
• Communication
The Four P’s Versus C’s
Product Customer solution

Price Customer cost

Place Convenience

Promotion Communication
 Company and Marketing Strategy
Learning Objective 4

• Describe the elements of a customer value-driven marketing strategy

and mix and the forces that influence it.
Marketing Strategy and the Marketing Mix
-Customer Value-Driven Marketing Strategy
-Developing an Integrated Marketing Mix
 Company and Marketing Strategy
Learning Objective 5

• List the marketing management functions, including the elements of a

marketing plan, and discuss the importance of measuring and
managing marketing return on investment.

Managing the Marketing Effort

Measuring and Managing Return on Marketing Investment
Managing the Marketing Effort
Marketing Analysis
 Developing a Differentiation Strategy
Firms begin with a SWOT analysis.
• Internally: What are the firm’s relative strengths and weaknesses?
• Externally: What potential threats and opportunities exist within the
market? Successful firms will…
• Leverage strengths that minimize future threats, and Correct
weaknesses that coincide with market opportunities
 Managing the Marketing Effort
Marketing Analysis – SWOT Analysis

Internal

External

Positive Negative
Developing a Differentiation Strategy- SWOT Analysis
• SWOT Analysis Strengths: What major competitive advantage(s) do we have?
What are we good at? What do customers perceive as our strong points?
• SWOT Analysis Weaknesses
What major competitive advantage(s) do competitors have over us? What are
competitors better at than we are? What are our major internal weaknesses?
• SWOT Analysis Opportunities
What favorable environmental trends may benefit our firm? What is the
competition doing in our market? What areas of business that are closely related
to ours are undeveloped?
• SWOT Analysis Threats What unfortunate environmental trends may hurt our
future performance? What technology is on the horizon that may soon have an
impact on our firm?
 Managing the Marketing Effort

Market Planning—Parts of a Marketing Plan

Executive summary Marketing situation Threats and opportunities

Objectives and issues Marketing strategy Action programs

Budgets Controls
 Managing the Marketing Effort
Marketing Implementation

• Turning marketing strategies and plans into

marketing actions to accomplish strategic
marketing objectives

• Addresses who, where, when, and how

 Managing the Marketing Effort
Marketing Department Organization
Functional
Geographic
Product management
Market
Customer management
 Organizing Marketing Departments
Four general types of organizations:
1. Functional organization: Each marketing activity is headed by a functional
specialist. e.g., sales manager, advertising manager, marketing research manager,
etc.
2. Most common form Geographic organization: Sales and marketing people are
assigned to specific countries, regions, and/or districts. Best for firms that sell
internationally or across country
3. Product management organization: One person is responsible for complete
strategy and marketing program for a single product Best for firms that sell many
different products and/or brands
4. Market (or customer) organization: Manager responsible for particular market
or type of customer Best for firms that sell one product line to many different
markets Or some combination thereof…
 Marketing Management

Four marketing management functions:

• Marketing analysis
• Marketing planning
• Marketing implementation
• Marketing control
Managing the Marketing Effort
Marketing Control

• Evaluating results
• Taking corrective action
• Operating control
• Strategic control
 Managing the Marketing Effort
• Four marketing management functions:
• Marketing analysis
• Marketing planning
• Implementation
• Control
 Marketing Implementation

Turns marketing plans into marketing actions by addressing:

• Who
• Where
• When
• How
• Implementation can be difficult but is critical to success.
 Marketing Control Process

Marketing control involves four steps:

• Set goals
• Measure performance
• Evaluate performance
• Take corrective action In essence it’s “Closed Loop” marketing*
 Take
Take Corrective
Corrective
Action
Action
Evaluate
Evaluate
Performance
Performance
Measure
Measure
Performance
Performance
Set
Set Marketing
Marketing Goals
Goals
Marketing Control
 Action
Corrective Marketing
Marketing Marketing
MarketingPlanning
Planning
Take Implementation
Implementation
Develop
DevelopMarketing
Marketing
Results Turn
TurnMarketing
MarketingPlans
Plans Strategies
Strategiesto
to
Evaluate into
into Achieve
AchieveMarketing
Marketing
Action
ActionPlans
Plans Objectives
Objectives
to
toAchieve
Achieve
Marketing Develop
Results
Marketing Develop
Objectives Marketing
Measure
Objectives Marketing
Control Plans
Plans&&Budget
Budget
Marketing
Marketing Analysis
Analysis of
of Company’s
Company’s Situation
Situation
Managing the Marketing Effort
 Measuring and Managing
Return on Marketing Investment

Return on Marketing Investment (Marketing ROI)

• Net return from a marketing investment divided by the costs of the

marketing investment
• Measurement of the profits generated by investments in marketing
activities
 Measuring and Managing
Return on Marketing Investment
 Company and Marketing Strategy
Learning Objective 5
• List the marketing management functions, including the elements of a marketing plan,
and discuss the importance of measuring and managing marketing return on
investment.
-Analysis (SWOT)
-Planning
-Implementation
-Department Organization
-Control
-ROI
 From Strategic Planning to Building Relationships

Marketing plays a key role in strategic planning:

• Provides a guiding philosophy.
• The marketing concept
• Provides input to strategic planners.
• Identifies attractive market opportunities
• Designs strategies to reach objectives.
 Marketing Strategy and the Marketing
Mix
The goal of marketing strategy is:
• Create value & build customer relationships
Marketing strategy decisions include:
• Market segmentation
• Targeting
• Differentiation
• Positioning
• Marketing strategy guides the marketing mix
Company-Wide Strategic Planning

Steps in Strategic Planning